GST rate reductions distorted tax structure, says Nirmala Sitharaman at HTLS
The Goods and Services Tax rate structure has become distorted due to a string of rate reductions after the new indirect tax was introduced two years ago, Finance Minister Nirmala Sitharaman said at the Hindustan Times Leadership Summit on Saturday. Once the GST rate was decided and the biggest indirect tax reform launched in 2017, Sitharaman said the GST council went about reducing the tax rate of certain set of commodities.
“And I am not blaming anyone here. Equally all of us went about in every meeting of the GST council to reduce the taxation rate of certain set of commodities,” she said. This, she said, kept on happening.
“At the end of the day, the intentions were good. (but the tax rates) kept reducing, kept reducing. Now reduction per se is not bad,” she added.
“I am not saying that people did it thoughtlessly, but in the enthusiasm to reduce taxes, that framework which was originally agreed at stage one of GST was distorted,” Sitharaman said, explaining that lowering the tax rate impacted the input tax credit and transferred more taxes to the buyer.
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Sitharaman’s assessment of the tax structure comes right ahead of the meeting of the Goods and Services Tax Council, the powerful body of state finance ministers led that she heads, later this month that is expected to discuss the first steps towards reviewing the tax rates.
Sitharaman declined to comment on the decisions that the council would take on the tax rates but underscored that a good streamlined GST regime for all assesses would be put in place.
Eventually, she said, the council will have to rationalise the tax structure and asked if it was really necessary to have a large number of slabs. “The original intent was to have three rates, merit, sin and the standard,” she said, underlining that there were “too many complications” in the tax rates.
Sitharaman listed complications in the tax returns that assesses have to file as the second area of focus, asserting that she had told got officials to simplify the forms that she acknowledged, “ended up asking for so much more information”
The minister counted the simplification of GST tax returns that were also distorted as another area that her team is working to fix.